The Ocean Resort Casino in Atlantic City owners said to be folding on troubled property

Submitted by admin on Thu, 10/01/2019 - 16:19

The Ocean Resort Casino in Atlantic City may be entering choppy waters, with the property possibly headed back on the market amid contractor claims of overdue payments and lagging slot-machine and table-game receipts.

Denver-based developer Bruce Deifik, who led last year’s $200 million purchase of the shuttered former Revel and reopened the property in June, is seeking a new buyer for the 47-story casino, according to a lawsuit filed by a former manager of the resort’s HQ2 nightclub alleging breach of contract and other claims.

Atlantic County records suggest casino-owner AC Ocean Walk LLC, in which Deifik holds a majority stake, owes contractors who worked on the property’s renovation more than $1 million while its gambling revenue trails that of all Atlantic City’s other casinos.

The new round of potential troubles may represent the latest dashed hopes for what was heralded as a new beginning for Atlantic City when the casino hotel first opened in 2012 but was soon dogged by lackluster traffic and financial woes.

Gaming-industry consultant Robert Ambrose said that rumors have been swirling in Atlantic City about the Ocean Resort’s possible sale but that he hoped the chatter would prove unfounded so Deifik’s team had time to see the plans for the property through.

As an independently operated casino, the Ocean Resort appears to be struggling in the seashore town’s shrunken market against better-known properties, said Ambrose, who also teaches casino management at Fairleigh Dickinson University.

“Building the customer base and the loyal following is very difficult, especially if you don’t have an established brand,” he said. “You need to give them the benefit of the doubt at least.”

Deifik did not respond to email and phone messages seeking comment on the Ocean Resort’s financial health and potential sale.

Built for $2.4 billion, the former Revel reopened as the Ocean Resort on June 27, the same day as the competing Hard Rock Hotel & Casino in what had been Trump Taj Mahal. The Revel had at that point been sitting vacant since September 2014, when it closed due to financial troubles after operating for only 2½ years.

Deifik previously led Henderson, Nev.-based Greenspun Corp.'s real estate division and remains president and chief executive of developer Integrated Properties in Denver. He has said he made his initial $10 million commitment to buy the casino from investor Glenn Straub of Wellington, Fla., without ever having visited Atlantic City.

His gaming-industry experience stems from his work as cofounder of Las Vegas-based Fifth Street Gaming LLC, an operator of modest-sized casinos and gambling resorts away from the Las Vegas Strip.

When announcing his acquisition of the former Revel in January 2018, Deifik said the property had failed because it “opened at a time when Atlantic City was still in economic recovery, and operationally, it just did not cater to the customer base for this destination.”

In his hands, he said, it would “represent one of the finest hotel-casino properties in existence today.”

During his tenure, the casino introduced a loyalty program featuring “Bruce’s Bucks” illustrated with caricatures of the Atlantic City newcomer and opened a branch of actors Donnie and Mark Wahlberg’s Wahlburgers restaurant chain in a space previously occupied by an offshoot of Village Whiskey, a Philadelphia gastropub.

On its gambling floor, however, the property appears to be falling behind.

Between the Ocean Resort’s first full month in operation in July and November, the most recent month for which figures are available from the New Jersey Division of Gaming Enforcement, there has been only one month — August — in which its slot and table revenue has not lagged that of Atlantic City’s eight other casinos. That includes the Resorts and the Golden Nugget casinos, which have fewer machines and tables.

In the meantime, Atlantic County clerk’s office records show two outstanding construction liens against the property demanding a collective $1.1 million for lighting displays and work at the casino’s nightclub. At least four other construction liens also were filed but have since been discharged, according to the records.

Such liens can — but don’t necessarily — indicate that property owners are under financial stress, since they’re filed by contractors or subcontractors who have performed work on a property but have not been paid, said attorney Jason Rabinovich, who specializes in real estate law in Philadelphia and New Jersey.

Alongside its possible financial woes, Ocean Resort has seen churn among its management ranks.

Mark Juliano, a former president of Caesars Atlantic City who left a job running Sands Bethlehem to lead the revamped former Revel, had moved on to another position in the Finger Lakes region of New York by the time the Ocean Resort opened.

In December, nightclub impresario Joey Morrissey, former proprietor of New York’s now-defunct M2 Ultra Lounge and Pink Elephant, sued Deifik over his removal as manager of the Ocean Resort’s HQ2 nightclub.

Morrissey accuses Deifik in the lawsuit of firing him in an attempt to deprive him of a partnership interest in the operation that he was awarded as part of his management deal. Deifik wanted Morrissey out because the nightclub manager’s stake in the property hadn’t been disclosed to lender JPMorgan Chase & Co. and would be an obstacle to the casino’s sale, the lawsuit alleges.

JPMorgan, which is also named as a defendant in Morrissey’s suit, lent Deifik’s group $163 million for the casino in June, an increase from the $85 million mortgage it extended when the property changed hands six months earlier, according to county records.

“Deifik is currently seeking to sell the casino to a new buyer and is seeking to eliminate anyone with ownership interest who could thwart the sale,” attorneys for Morrissey wrote in the suit.

In addition to at least $25 million in damages for breach of contract, defamation, and other claims, Morrissey seeks a judgment asserting that his interest in the property has priority over JPMorgan’s.

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